As a civil litigator, what I find worth noting about Heath’s fraud is that Wings Financial, Mr. Heath’s bank, caught on to the simple scam, having noticed “unusual activity” in the account, and notified authorities.
When should we hold banks responsible for policing the money flow in and out of their accounts? When should we treat them as innocent bystanders who have no duty to babysit accounts and protect customers from scammers?
In my opinion, we should give banks quite broad immunity from being dragged into financial crimes litigation, at least as far as civil liability. Bear in mind, though, that U.S. financial institutions are also regulated by state and federal regulators (the FDIC, the OCC, NCUA, etc), which also can impose discipline on and sanction banks.
In 2005, a Florida lawyer, Tucker Ronzetti, laid it out in an American Bar Association publication. The advice to banks, in essence: “if you see something, say something.” Otherwise, banks do face some risk of being sued for “aiding and abetting” fraud, conspiracy, or other claims by defrauded customers.
Furthermore, U.S. banks are generally protected by a “safe harbor” if they report “suspicious activities” to authorities and receive some protection for “false positive” reports. On the other hand, they’re in the business of taking money in and paying it out, not spearheading financial fraud investigations. Presumably banks might be reluctant to take on that role. It is not a “profit center.” And if your bank or your business’ bank were incorrectly reported “to authorities” for “suspicious activities,” you might not be able to sue the bank but you might be angry; you might stop banking there.
I will follow the recently filed Crabtree v. Wells Fargo case to see whether the bank will be held liable in whole or in part for the plaintiff’s loss to third-party scammers or whether the Crabtree law firm will end up bearing the loss on account of the bank’s attenuated causal role (particularly in comparison to the law firm, the gullible dupe).